Exercise price $4 + warrant buy price $0.50 = $4.50 in 2014. You have to add interest over the 3 years on the $0.50 at about 5% per annum means additiona 9 cents compounded. So the real cost in 2014 is about $4.60.

However 2014 is not exactly short time. If this is the route this investor takes then he is a long term investor and is looking for more than $5.

However this could also be a short term investor buying warrants at 0.50 and hoping to sell well before 2014. This way this investor must be very confident OR knows something about near term happenings that may drive the warrants to, say about $1.

More bang per buck that way or to control more shares.